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German Trade Unions Seek Higher Wealth Taxes

by Ulrika Lomas,, Brussels

20 December 2011

President of the German Confederation of Trade Unions (DGB) Michael Sommer has called for a greater fiscal contribution from the country’s wealthiest to resolve the ongoing debt crisis and to bring the budget to balance, notably for the tax burden to be increased on wealth and on inheritances in Germany.

The union leader also urged the government to introduce a large package of fiscal measures in Germany, including securing a new stimulus package.

Vehemently rejecting the idea of a debt brake rule, Sommer insisted that the current financial and economic crisis is not primarily a debt crisis, but rather a crisis of state fiscal revenues, arguing that it is no wonder that the state is lacking money given the successive tax cuts that have been introduced over the course of the past ten to fifteen years.

According to Sommer, if the tax laws of 2000 were still in application in Germany, then the state would have additional revenues this year of around EUR50bn (USD65bn), and there would be no new debt today.

To address the crisis of state fiscal revenues, the DGB leader therefore called for the introduction of a wealth tax, for a rich tax, for an increase in inheritance tax in Germany, as well as for a tax imposed on financial transactions.

Challenging the current situation in Germany, where well-paid employees pay significant amounts in income tax, while individuals that do not work, and simply live on income derived from capital, pay only 25% tax, Sommer called for the abolition, or, at the very least, for a dramatic increase in the existing withholding tax rate. Here, Sommer underscored that the 32% rate proposed by the Social Democrats (SPD) was “a first step in the right direction”.

The DGB called back in July 2009 for a tax to be levied on all financial transactions.

At the time it proposed that a stock market sales tax, levied on the sale of shares and derivatives, could be introduced in the first instance, explaining that such a levy would not only serve to curb high-risk speculation, but would also generate increased revenue for the state.

A tax on financial transactions would, the DGB maintained, predominantly affect speculators, given that the more an investor opts to buy or sell stocks and shares, the more tax he would then have to pay. Long-term investors, on the other hand, would be only mildly affected.

DGB calculations showed that simply imposing a tax rate of 0.1% on all transactions conducted on the stock market could generate as much as EUR13.5bn per year for the German government.

TAGS: individuals | inheritance tax | tax | speculation | employees | withholding tax | gift tax | Germany | Trade Union | individual income tax

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